Studies Suggest Majority of Institutional Investors will Invest In Cryptocurrencies in the Future
According to a study conducted by financial analysts, Coalition Greenwich, on behalf of Fidelity Digital Assets, seven out of ten institutional investors are signalling that they will purchase cryptocurrencies in the future.
The survey, which took place between December 2020 and April 2021, included 1,100 institutional investor participants worldwide, with over half revealing they already owned several digital assets such as Bitcoin (BTC) and Ethereum (ETH).
Specifically, approximately 90% of those interested in entering the cryptocurrency market in the future foresee their clients’ portfolios or their own balance sheets to have some level of cryptocurrency-exposure in the next five years. This includes through direct ownership, ownership of cryptocurrency-based investment products or even exposure to specific cryptocurrency focussed companies.
Historical sentiment
The statistics are in line with several recent studies, including a survey by Nickel Digital Asset Management (NDAM) which found 82% of institutional investors expect to increase their exposure to digital assets by 2023. Moreover, according to the NDAM survey, four out of ten respondents suggested they would “dramatically” increase their exposure to the cryptocurrency market, with only one in ten suggesting the opposite.
The NDAM study also went further than its counterpart by Coalition Greenwich, exploring the reasons for these statistics. Of the institutional investors questioned, 58% alluded to the long-term capital gains potential in the cryptocurrency market, whilst 38% suggested the market had matured.
Are ETFs the new NFTs?
Indeed, over the past year, there has been a surge in investment products, such as cryptocurrency-focussed exchange-traded funds (ETF) and indices that have made it easier for institutional and professional investors to gain exposure to the popular market. Grayscale Investments’ Grayscale Bitcoin Trust (GBTC) – the market’s most popular Bitcoin ETF – has seen its assets under management (AUM) soar to just shy of $20 billion in less than 18 months.
Furthermore, the number of cryptocurrency-focused ETFs globally has also seen a marked rise, with regions such as South America and South-East Asia seeing their first Bitcoin ETFs launched this year.
Concerns remain but fidelity continues on
However, concerns remain amongst some investors regarding the long-term viability of cryptocurrency as an asset class. The Coalition Greenwich survey revealed that the space’s volatility is still a major obstacle when analysts make cryptocurrency investment decisions. Furthermore, there are also concerns about the ease with which large investors can manipulate the market, and the legal consequences that might have for a regulated investor. A similar picture is painted in the NDAM study, with only 34% of respondents thinking the regulatory environment for the cryptocurrency space is improving.
Fidelity Digital Assets is seemingly unconcerned however, choosing instead to prepare for a future in which cryptocurrency dominates the financial sector. Earlier this month, the investment giant announced its cryptocurrency-focussed outfit would expand its staff by 70% in response to direct client demand for the cryptocurrency market. Moreover, Fidelity Digital Assets has been preparing since Q1 2021 to launch its own Bitcoin ETF, having already provided financial backing for an ETF called the Wise Origin Bitcoin Trust.
Combined, both the studies and activity in the institutional investment space suggest that the world’s top investors are starting to take the once derided market seriously.
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